The missing bit

Offshore currencies are employed by countries to enable Forex trading of their currencies, keeping control over the capital flow through its geographical boundaries at the same time. In some cases there are foreign exchange or banking regulations which require onshore capital controls, hence the same currency is traded offshore with different regulatory regime. Eurodollar: Eurodollars are the offshore bank deposits denominated in US dollars. Being outside the United States, these deposits don’t fall under the Read more…

A futures contract is essentially a standardised forward contract, except that the deal is made through an organised and regulated exchange rather than being negotiated directly between two parties. These exchanges specify certain features to standardise the product, and also provides the guarantee that the contract will be honoured. Based upon settlement futures contracts can be classified as: Physically Delivered Contract – one side agrees to deliver a commodity or asset on a future date Read more…

A forward contract is made directly between two parties. In a physically delivered forward contract one party agrees to buy an underlying commodity or ﬁnancial asset on a future date at an agreed ﬁxed price. The other party agrees to deliver that item at the stipulated price. Both sides are obliged to go through with the contract, which is a legal and binding commitment, irrespective of the value of the underlying at the point of Read more…

A swap is an agreement made between two parties to exchange payments on regular future dates, where each payment leg is calculated on a different basis. For example, suppose that a US company has to make interest payments on a euro loan over the next ﬁve years. Unfortunately its income is in US dollars, so it is exposed to changes in the exchange rate between the euro and the dollar. The ﬁrm can enter into Read more…

When staying in Scotland, a trip to Skye is almost ritualistic. People visit due to various reasons. Some go to see the dreamy vistas, some for a peek into the life in highlands, and some just for the fun of driving on winding mountain roads. I fell somewhere between these categories. Rocky cliffs with castles atop are sight to behold, telling the story of human perseverance. At the same time nature has a way to Read more…